Pinduoduo fully embraces "high-quality development".
Source: Lieyun Selection, text/Lv Xinyi
It has been 150 days since Zhao Jiazhen became co-CEO on April 4 this year, and has brought "surprises" to Pinduoduo.
On August 29, Pinduoduo released its financial report for the second quarter of 2023, which showed that its revenue was 52.28 billion yuan, a year-on-year increase of 66% and a month-on-month increase of 38%. Net profit was RMB13,108 million, up 47% year-on-year, and non-GAAP net profit was RMB15,269 million, up 42% year-on-year. This also exceeded the previous Bloomberg forecast of revenue of 43.282 billion yuan and profit of 10.870 billion yuan.
Zhao Jiazhen led Pinduoduo to set a new growth rate in the past 8 quarters. Prior to this, from Q3 2021 to Q1 2023, the company's revenue growth rate was 51%, 3%, 7%, 36%, 65%, 46% and 58% year-on-year, respectively. The month-on-month growth rates were -7%, 27%, -13%, 32%, 13%, 32%, 13%, 12% and -5% respectively.
(Pinduoduo's revenue growth rate in recent quarters; Image source: Lei Di)
Affected by the favorable performance, Pinduoduo's stock price also rose, on August 29, Pinduoduo US shares rose more than 10% premarket, and on August 30, the US stock market closed, Pinduoduo closed at $93.22, up 15.43%, with a total market value of $123.9 billion.
Looking at the timeline extension, on Zhao Jiazhen's first day in office on April 4, Pinduoduo closed at $73 that day. In 150 days, Zhao Jiazhen led Pinduoduo's stock price to rise by a total of 20%.
This is Zhao Jiazhen's first financial report since becoming the new co-CEO, and this financial report reveals the new changes brought by the new official.
In the earnings call, high-quality development has become a high-frequency word. Zhao Jiazhen said frankly that more energy will be focused on high-quality development. Through the promotion of the two key tasks of "more affordable" and "good service", Pinduoduo completes the overall high-quality development. Use the "10 billion ecology" special fund to support businesses and promote the construction of platform ecology. "The shift to high-quality development is paying off faster and more quickly than expected." Zhao Jiazhen said.
Looking back, it is not difficult to find that high-quality development has long become the main theme of Pinduoduo this year.
In May, after Zhao Jiazhen served as co-CEO for one month, Pinduoduo released its Q1 financial report, proposing for the first time to enter a new stage of fully embracing high-quality development, and taking quality improvement as the primary goal. But at this time, high-quality development is not as important as it is now. In July, Zhao Jiazhen said in an interview that since the beginning of this year, Pinduoduo has clarified high-quality development as the most important goal and task in the next stage. In this financial report, Pinduoduo shows its determination to fully embrace high-quality development.
High-quality development is a slogan and a goal. If you want to complete it, you need to open the Q2 financial report to see how Zhao Jiazhen moved towards the goal of high-quality development through the transformation of Pinduoduo's daily operations?
Pinduoduo "reconstructs" Pinduoduo
Zhao Jiazhen has found a suitable position for the implementation of high-quality development.
It is mainly divided into high-quality consumption, high-quality supply, and high-quality ecology. It is not difficult to find that the business involved has covered from the back-end to the front-end to the overall atmosphere, so that Pinduoduo will usher in new changes from the inside out.
From the perspective of three specific directions, after Zhao Jiazhen took office, he helped the fast-growing Pinduoduo complete the transition from fast to stable. This is related to Pinduoduo's own body size, previously, during the Huang Zheng and Chen Lei periods, Pinduoduo was still an "e-commerce dark horse", and speed was the primary key to development. Now, Pinduoduo has achieved certain results, and asking for a "stable" word for "fast" is the focus of Zhao Jiazhen's work.
It is understood that after Zhao Jiazhen took office, the first project promoted internally was the special action for the protection of minors. In addition, in the first half of this year, Pinduoduo boldly launched six major measures for platform governance, involving food and drug safety, protection of minors, and compliance of merchant live broadcasts.
Up to now, a total of more than 100,000 vulgar advertising images have been cleaned up; More than 300,000 illegal goods in jewelry, home ornaments and other categories were disposed of; It took the lead in major e-commerce platforms to ban the sale of "nitrite" on the whole network, and implemented the real-name sale and purchase of "non-kitchen knives".
Although the platform atmosphere is an invisible link, it is difficult to manifest in financial data. But it is a fuel for the sustainable development of the platform. In the past six months, efforts have been made in this link, which can also reflect Pinduoduo's determination to fully embrace high-quality development.
From the perspective of high-quality consumption, Pinduoduo focuses on the two links of "more affordable" and "good service".
Combined with Pinduoduo's own positioning, it is not difficult to find that "more affordable" is actually to consolidate Pinduoduo's low-price positioning and strengthen users' low-price mentality; "Good service" is to make up for the shortcomings of Pinduoduo's previous full-process service experience in the supply chain and logistics side.
From the perspective of the industry, at present, Pinduoduo's low-price basic market is facing a stage of fierce competition, and JD.com frequently increases its low-price strategy, aiming to grasp the low-price discourse power through the marketing combination box. In addition, JD.com's after-sales and logistics chain is more mature and more recognized by users.
In the face of its fierce rival JD.com, the "more affordable" and "good service" proposed by Pinduoduo at this time may not only be a refined operation of its own business, but also a defensive measure proposed in the current competitive environment.
On the eve of the high-profile 618 promotion on e-commerce platforms in the first half of the year, Pinduoduo proposed a subsidy strategy of "618 every day", and said that "if you buy expensive, you will be compensated". In April, Pinduoduo launched the "Digital Home Appliance Consumption Season" with tens of billions of subsidies, issuing excess subsidies to digital home appliances such as mobile phones, TVs, air conditioners, and refrigerators. Subsequently, Pinduoduo launched the fifth quarter of "More Reading Month" and invested 100 million yuan in reading funds for official subsidies.
Real money subsidies have brought about a real increase in sales. During the 618 period, the sales volume of Pinduoduo beauty brand segment increased by more than 790%; The number of mobile phone orders in the county market increased by 130% year-on-year; The sales scale of all categories of home appliance brands increased by 113% year-on-year.
The normalization of tens of billions of subsidies is bound to have an impact on the current cost structure. According to the financial report, in Q2 2023, Pinduoduo's sales and marketing expenses were 17.5 billion yuan, a year-on-year increase of 55%, mainly due to the increase in promotional and advertising campaign expenditure. Total operating expenses were RMB20.8 billion, up 41% year-on-year. The increase was mainly due to higher sales and marketing expenses.
On the "good service" side, Pinduoduo tilts resources for the elderly and consumers in remote areas, and upgrades the after-sales customer strategy to provide consumers with refund-only services. Through the 10 billion ecological project, resources will be tilted towards high-quality merchants and commodities, and the quality growth of small and medium-sized enterprises and high-quality merchants within the platform will be promoted.
In addition to high-quality development around consumers, Pinduoduo is also striving to improve the development efficiency and development quality of the supply side.
In the second quarter of this year, Pinduoduo increased support for small and medium-sized manufacturing factories, and up to now, Duoduo has covered all categories except food and daily chemical products. Helped more than 10,000 factories reach more than 20 countries and regions. Pinduoduo said that with the help of Duoduo cross-border, many factories have not only recovered orders, but also increased profits, and some foundry enterprises can even reach 5 times the profit margin of traditional foreign trade by producing differentiated products.
With multi-dimensional efforts, in the second quarter of this year, Pinduoduo's online marketing and other service revenue was 3,732.8 million yuan, a year-on-year increase of 50%; Revenue from trading services was RMB14.35 billion, up 131% year-on-year.
For high-quality development, agriculture is the most important play
In addition to the overall transformation of the platform, Pinduoduo also has a part of its business that deserves a separate analysis. As one of the main platforms for the sale of agricultural products, agriculture will become the highlight of high-quality development in the future.
In fact, this can also be seen from Zhao Jiazhen's past resume. Prior to his promotion to co-CEO, Zhao Jiazhen's role was to implement Pinduoduo's "agricultural uplink". Gradually evolve agricultural products from a single category to a key sales category of Pinduoduo.
Under the leadership of Zhao Jiazhen, Pinduoduo has successively launched special activities such as the Agricultural Cloud Action and the 10 billion subsidy consumption season to help high-quality agricultural products and manufacturing merchants on the platform.
Pinduoduo's investment in agriculture should be viewed from two dimensions: short-term and long-term.
In the second quarter of 2023, Pinduoduo's tens of billions of subsidies continued to increase subsidies for high-quality agricultural products, and the sales of Baiduo agricultural products increased by 80% year-on-year; With the support of the zero commission policy for agricultural products, the number of agriculture-related businesses settled in tens of billions of subsidies increased by 60% year-on-year, covering more than 100 agricultural production areas across the country.
In the second quarter, Pinduoduo increased the exposure of agricultural products on the platform through live streaming of industrial belts. With the "special live broadcast + tens of billions of subsidies" activity, it provides a stage for Quanzhou, Chengdu, Guangzhou and other places to show their talents.
On the occasion of the release of the second quarterly report, Pinduoduo launched the "Quality Agricultural Goods Golden Autumn Supplement" activity, mainly for seasonal agricultural products in the industrial belt to increase subsidy input.
In addition, on the day of the announcement of the second quarterly report, Pinduoduo officially announced that the board of directors has appointed Ivonne Rietjens, a tenured professor at Wageningen University in the Netherlands, as an independent director. Wageningen University is recognized worldwide as a leading agricultural research institution. Professor Rietjens has been a professor at the university since 2001 and is currently the head of the Department of Toxicology. After Professor Rietjens joined, the total number of board members of Pinduoduo increased to 7, of whom 4 are independent directors.
It is understood that Professor Rietjens has been cooperating with Pinduoduo for eight years. Pinduoduo believes that the addition of Professor Rietjens is expected to bring rich professional experience and broad international vision to the company in the field of agricultural technology and food safety.
The short-term investment reflects a short-term boost in sales. The real harvest period of Pinduoduo in agriculture lies in the persistence of long-term investment.
At the earnings call, the first thing Chen Lei said was R&D investment.
"In the past 12 months, our investment in R&D has exceeded 10 billion," Chen said. According to the financial report, Pinduoduo's R&D expenditure in the second quarter was 2.734 billion yuan, a slight increase from 2.6114 billion yuan last year.
In the second quarter of this year, Pinduoduo successively held the third Duoduo Agricultural Research and Technology Competition, "Pinduoduo Cup" Science and Technology Small Institute Competition and other events, and donated 100 million yuan to set up a research fund to support China Agricultural University to carry out basic research on agricultural science and technology.
In the long run, continuous investment in the production and planting of agricultural products is bound to shorten the performance cost of Pinduoduo's agricultural supply chain and strengthen Pinduoduo's voice in the agricultural industry. However, this road is full of uncertainty, and how much return Pinduoduo can get by investing heavily in agriculture needs to wait for the market to test.
Also uncertain is Pinduoduo's overseas strategy.
At present, Pinduoduo's cross-border platform Temu has successively launched its Chilean site and Philippine site. The establishment of the Philippine site indicates that TEMU has taken the first step into Southeast Asia. Up to now, Termu has covered 38 markets around the world, including Asia, Europe, North America, Latin America and Oceania.
Pinduoduo's investment in TEMU is not soft at all. The same low-price strategy as in China, as well as large-scale marketing, opened up TEMU's voice in overseas markets. In the first half of this year, TEMU appeared in the "most expensive advertising space" Super Bowl in the United States, and it is understood that the total price of more than a minute of advertising is nearly $15 million.
After the low price + marketing strategy, TEMU has indeed achieved certain results, according to data released by Statista, the number of Termu users in the United States has exceeded 100 million. Goldman Sachs analyst Eric Sheridan said that as of the end of the second quarter of this year, Temu had more than 120 million downloads worldwide, ranking among the top ten global app downloads.
Liu Jun, vice president of finance of Pinduoduo, said in the earnings call that he does not pay attention to TEMU's financial indicators for the time being. In addition, Liu Jun also mentioned that Temu also faces many challenges in the process of development, such as cultural differences, social environment differences and consumer needs.